Impacts of the Financial CHOICE Act on Transgender People

By Lars Z. Mackenzie | June 20, 2017

On June 8, 2017, the House of Representatives passed the Financial CHOICE Act. If signed into law, this Act will roll back numerous regulations set in place by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. News reporting about this Act has centered on the government’s role in Wall Street bail-outs and the risks and benefits of regulating how financial advisors invest consumers’ money. Analysis of its gendered and racialized impacts by contrast have been markedly absent. Beyond eliminating regulations for financial institutions, the Financial Choice Act also threatens to dismantle the Consumer Financial Protection Bureau (CFPB), an independent government agency that investigates exploitative financial practices on the behalf of U.S. consumers. If signed into law, the Financial Choice Act would dramatically reduce the resources individuals have to challenge incorrect, outdated or damaging information about them in their credit reports, a change that holds significant consequences for people of color and transgender individuals.

A credit report tells a story about an individual’s trustworthiness as a borrower: the amounts of past, outstanding and revolving debts; all known previous names and addresses; and any history of bankruptcies or felonies. Financial lenders frequently access credit reports to determine a consumer’s eligibility for credit and how much that credit will cost. However, consumer credit reports are increasingly utilized by employers, landlords and insurance companies to assess applicants, a practice that intensifies housing and employment inequality along race and gender lines. Black and Latinx communities are disproportionately impacted by credit report checks due to systemic discriminatory lending practices that charge higher interest rates according to race, leading many to default on debts. A history of delinquent payments, bills sent into debt collection and negative public records signal risk to lenders, employers and landlords and further disenfranchises Black and Latinx communities.

For transgender people, and especially transgender people of color, the practice of evaluating credit reports in housing and employment decisions reproduces inequality due to the way that names are recorded within the reports. Credit reports indefinitely list any name previously or currently associated with a person, which means that transgender people’s credit reports often contain their previous names. The presence of a previous, differently gendered name on a person’s report can alert a potential landlord or employer to their transgender identity. For many, this could mean a retracted job or housing offer. A legal name change is a major step for many transgender people, enabling them to use a name that matches their gender identity and have that name reflected on official identification documents. According to the 2015 U.S. Trans Survey, 25% of respondents who used an ID with a name that did not match their gender presentation experienced verbal harassment and 16% were denied access to services.

In a recent study from the Suffolk University Law School, researchers found significant bias in housing against transgender and gender non-conforming people in the Boston metropolitan area, where gender identity is protected under anti-discrimination law. A resume testing study conducted in D.C., another city that includes gender identity in its anti-discrimination hiring law, found significant bias against transgender job applicants. Just nineteen states explicitly include gender identity within their anti-discrimination laws, meaning that in most states, denying transgender job and housing applicants after discovering their transgender identity is legal. Further, as evident from these two studies, gender identity protection on paper does not necessarily ensure equal access.

According to the 2015 U.S. Trans Survey, transgender people are 3 times more likely to be unemployed than the general U.S. population and nearly 1 in 4 transgender people report that they’ve been evicted or denied housing due to their gender identity. Black transgender people feel the impacts of housing discrimination more intensely: 31% of Black transgender women reported experiencing homelessness due to their gender identity in the past year, compared to 12% of white transgender women. Rental housing applicants are now essentially required to have an established credit history, a practice that requires that people take out debt in order to secure a place to live or furnish a co-signer who has proven to be a responsible debtor. For transgender renters, obtaining an apartment may require either outing themselves as transgender or asking a roommate to be the sole leaser. In either case, transgender renters are put in precarious situations with few legal protections.

The problems that credit reports cause are part of a broader, societal-wide belief that collecting and analyzing more and more data about people will help the financial services industry make better decisions and reduce the risk of lost profits. While only a complete restructuring of credit reporting systems could make these processes fair for marginalized people, there are three clear recommendations that would reduce the harm caused by credit reports in regards to housing and employment.

Millions of people in the U.S. have credit reports that contain significant errors, however the credit reporting agencies do not substantially address disputes from consumers as their clients are the financial institutions who generate credit report data, not individuals. The CFPB helps individuals challenge errors on their credit reports and files suits against credit reporting agencies for illegal and exploitative practices. The Financial Choice Act threatens to eliminate one of the only resources individuals have to challenge incorrect, outdated, and damaging information about them on their credit reports. The Senate should reject the Financial Choice Act’s proposed changes to the CFPB.

Allow previous names to be fully redacted from credit reports

Credit reporting agencies allege that they list previous names associated with a consumer on their credit reports in order to alert the consumer of potential identity theft, a growing problem that affects millions of U.S. residents each year. While transgender name changes can be proven to be legitimate and not evidence of identity theft, credit-reporting agencies are reluctant to fully redact transgender people’s previous names from their reports. This practice harms transgender people more than helps them. While a previous name could be privately retained in order to match a transgender person’s credit history before and after a legal name change, displaying a former name enables discrimination against this marginalized population. To truly protect U.S. consumers, legislators should enable consumers to remove outdated demographic information from their credit reports.

Reduce reliance on credit reports for housing and employment decisions

Credit reports codify racialized and gendered discrimination, making it harder for disenfranchised people to access jobs and housing if their credit reports contain damaging information. Reducing the use of credit checks in these types of decisions would level the playing field for a wide range of marginalized people: people of color, immigrants, transgender people, and low-income people. Future legislation should restrict the use of credit reports in these types of decisions.